State able to use farm funds in budget

State lawmakers and the governor are free to help balance the budget by taking money raised by farmers, the Arizona Court of Appeals has ruled.

The judges rejected arguments by the Arizona Farm Bureau Federation that the more than $160,000 at issue, which comes from donations and fees assessed against farmers, has to be used solely for the purposes for which they were raised. In this case, the farm group argued, the funds were specifically set aside for "furthering agricultural interests" and not to deal with problems elsewhere in the state's finances.

This ruling is significant because it marks a rare victory for state officials who raided various funds during the last three years to make up for lower than anticipated taxes. By contrast, the courts have blocked other efforts, including taking cash from one fund designed to reduce smoking and another from a pot of money earmarked for cities.

That worries farm bureau lobbyist Joe Sigg. He said the state's financial situation is even worse now than when it was two years ago when lawmakers first took the case. Sigg said the ruling, unless overturned, will only encourage lawmakers to continue to take money from the three funds as fast as farmers put it in.

The lawsuit stems from the fact that the original $9.9 billion budget adopted two years ago, when Janet Napolitano was still governor, included more than $276 million taken from various special funds to make up for declining tax collections.

Some of those funds were levies raised on particular professions to run regulatory agencies like state boards of nursing, optometry and cosmetology. Other funds swept into the budget had been designed for special programs like helping those cheated by registered contractors, assisting crime victims and aiding those in need of housing.

The funds at issue here are different. They were raised by fees that lettuce, grain and citrus growers imposed on themselves for research and marketing. Attorneys for the farm groups argued that the state was simply holding that money in trust for the farmers and that it was not state money.

But appellate Judge Patrick Irvine, writing for the unanimous court, said nothing in the statutes creating the funds ever says they are being held solely in trust. And he said that just because the farmers provided the money for a specific purpose does not mean they have any legal interest in the money once paid to the state.

All of that, Irvine said, leaves lawmakers free to divert the cash for any other purpose.

Sigg expressed disappointment. "From our perspective, when you collect funds for specific purposes and the Legislature has agreed that those are the specific purposes, to have the Legislature come back and sweep them creates concern," he said.

Sigg said if lawmakers continue to raid the funds, one option would be for the councils that administer them to simply lower the assessment to zero, leaving nothing for the state to take. But he said there are downsides to that, including leaving the councils without any means to operate - and to once again promote the products - once the state's budget situation improves.